Venture Capital/Interview/ Inside Taavet+Sten: not your typical startup investor Taavet Hinrikus and Sten Tamkivi have backed many of Europe's most interesting startups — and seems like they're only just getting started By Amy Lewin 28 April 2022 Sten Tamkivi and Taavet Hinrikus Sten Tamkivi and Taavet Hinrikus \Venture Capital The pitch deck Vue Storefront used to bag €20m from Felix Capital and Creandum By Zosia Wanat 23 March 2023 Venture Capital/Interview/ Inside Taavet+Sten: not your typical startup investor Taavet Hinrikus and Sten Tamkivi have backed many of Europe's most interesting startups — and seems like they're only just getting started By Amy Lewin 28 April 2022 Taavet+Sten is not your typical VC fund. In fact, it’s not a fund — it’s just Taavet (Hinrikus) and Sten (Tamkivi) pooling their personal capital to invest in early-stage European founders, and a whole lot more besides. But whatever it is, it’s worth watching. Before banding together, Hinrikus, cofounder of Wise, and Tamkivi, cofounder of Teleport, were prominent angels in their own right. Hinrikus had done around 150 angel deals, and Tamkivi around 40 or 50. But things were lonely, Tamkivi says. “I was never a solo founder,” he told Sifted back in December, on a freezing, snowy day in Tallinn, Estonia, where Taavet+Sten is based. “I like banter.” Joining forces seems to be working out well for them: since February 2021, Taavet+Sten has done dozens of investments (although many remain undisclosed). The portfolio includes most of the biggest names in Estonia — Bolt, Veriff, Skeleton Technologies and Zego — and some seed funds too, like Tiny VC. “Scar tissue” Tamkivi loves the “sensation of building something out of nothing,” he says. “It’s fucking hard work, but nudge by nudge you can move big markets along. “As Taavet often says, building one more Wise feels kind of boring — we want to build 100,” he adds. They’re not the only founders scratching the investing itch. Tom Blomfield, Guillaume Pousaz, Daniel Ek and Céline Lazorthes are other prominent European founders now writing dozens of angel cheques per year. And Tamkivi expects many more will follow. 👉 Read: Inside Taavet Hinrikus’s vast angel portfolio “When a startup raises a seed round with a respectable VC and 10 angels, the VC takes a board seat, but the founders often say it was the angels that helped the most. They have the scar tissue.” Part of Taavet+Sten’s mission is to figure out how to create investment frameworks, networks and models that other founders can use too. “It’s not quite a fund, it’s not quite a VC, we’re iterating on the format to see what we can figure out for others.” A model for others? So, is the Taavet+Sten model one to follow? “It brings a lot of liberty — but chaos as well,” says Tamkivi. Taavet+Sten has no external LPs to answer to, and the investment committee has just two attendees. But they’re gradually building a team around them and now have about seven or eight employees. When Hinrikus and Tamkivi were investing as angels, they tended to be more passive investors, says Tamkivi. Now, he adds, they’re much more active — and “way more careful on picking companies.” “As Taavet often says, building one more Wise feels kind of boring — we want to build 100” They’re hands on, but only in ways that they believe are actually helpful. “We’re fighting not to take board seats,” says Tamkivi; the team’s support is much less structured. “What does a founder actually need? WhatsApp access, capital, network.” Tamkivi says he’s taken a founder off to spend half a day in the forest to discuss strategy before, and introduced another to a much more experienced founder to ask very specific questions about 15-minute pharmacy delivery. He also takes a lot of calls to pass on what he has learnt from his years of experience. “I recognise at what stage you need what thing.” Taavet+Sten plans to do several dozen deals per year, writing first cheques of €500k to €2m. Most of the duo’s investments are in Europe, although there are also a handful in southeast Asia and the US. They do follow ons — but generally avoid doing pre-seed deals now. Instead, they’ve backed several early-stage funds, like Tiny VC, as a way to get in on those deals. “Tiny VC is amazing at indexing Europe,” says Tamkivi. “So let’s get into a notable share [of those deals]. The financial performance is proven, and we love supporting them.” He’s also been a member of Seedcamp’s advisory board for a decade. Taavet+Sten’s dealflow isn’t bad. Tamkivi reckons they see a “few hundred deals per quarter” while they each see a lot of startups related to the businesses they previously built: “Taavet probably sees all the fintech deals in Europe and a lot of future of work and global mobility companies tend to find me.” The duo are also interested in Web3 and crypto. “This is going to happen,” says Tamkivi, “and it’s going to be a very different internet on the other side”. And they care about climate, too. From deeptech and synthetic biology to crypto tokens for carbon credits, they’re keen to see startups working on it all. These topics are slightly out of their comfort zone, but that’s a good thing, says Tamkivi. There are only so many neobanks and buy now, pay later startups you can meet. “When you have a pitch meeting and you don’t understand half of it, that’s a lot of fun.” After Skype, Wise and Bolt, what’s next for Europe? We’re now in the third wave, or third startup generation, in Estonia, Tamkivi says — and that’s exciting. First there was Skype (where Tamkivi and Hinrikus both worked), and its success left more than 2,000 people with a taste for what it’s like working at a successful tech company, as well as access to capital to start their own thing. The next wave involved the likes of Wise and Bolt, and now their employees are founding companies. “There’s a mentality of giving back,” says Tamkivi — and it’s not just visible in Estonia. The Finnish gaming ecosystem has a similar dynamic, with Nokia giving birth to Supercell and Rovio. “It’s a virtuous circle.” Investing in tech isn’t all that Hinrikus and Tamkivi do. They’re also hugely influential in the Estonian tech scene — and wider society. Tamkivi was president of the Estonian Founders Society for three years, sits on boards of museums and financial groups and is a member of the council for Estonia’s famous e-residency programme. And they back non-profit initiatives too. They have a real estate project underway, and helped set up a coding school and a philanthropic fund to back education projects. In total, there are around 1,100 early-stage teams in Estonia. About 1% of the country’s entire working population works in startups — and startups account for 2-3% of GDP, says Tamkivi. “It’s pretty amazing.” What’s more, the tech industry is growing by 25% each year, which is 10 times more than the overall economy. If things continue in this direction, by 2030 one-third of Estonia’s GDP could come from the tech industry. “It will become the normal economy.” Challenges ahead It’s not all smooth sailing though. “There’s not enough very long capital,” says Tamkivi. That’s going to have an impact on Europe’s deeptech challengers: “Can you really have a breakthrough in fusion energy or quantum [in the cycle of a 10 year fund]?” And this is when Tamkivi the visionary really got going: if the common good brought about by a new kind of technology is so global in nature, do we need new funding models to ensure that those projects get financed? Who should pay — and who will pay — to create a device in space that would protect the world from an asteroid collision? That’s when we ran out of time. If you’d like to meet Sten Tamkivi — along with startup leaders from Bolt, Veriff, Starship Technologies and Single.Earth — apply for a ticket at our event in Tallinn on May 3. 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